Leverage Farming with Instadapp's Fluid Vault - MVHQ

Leverage Farming with Instadapp's Fluid Vault

SnakeEyes
May 28, 2024
Platform
Layer2
General Strategy
Leverage Farming with Instadapp's Fluid Vault

I started testing a new DeFi strategy in the last couple weeks and I've been adding to the position repeatedly as I've become more and more bullish on it, and that position is in Instadapp's Fluid Vault for weETH/wstETH.

 

Instadapp - https://fluid.instadapp.io/dashboard 

 

The point of this vault is to farm 1x eigenlayer points, 3x etherfi points, and 1.5x zircuit points, while having the ability to leverage up that position in a way that is seemingly safe and sound, up to the clearly specified point of liquidation at 95% LTV (loan-to-value). My health ratio is currently at 86.63%, and the amount of points I'm farming on my base position is now 7.5x eigenlayer points, 22.5x etherfi points, and 11.25x zircuit points.

 

Basically, what you do is deposit weETH and then use their leverage option to automatically borrow wstETH (costing between 15-33% APR on that borrowed position from what I've seen since entering), and use the value of that wstETH to increase your weETH position up to 10x or so before entering the “risky”, as stated on their site, area of LTV (>90%). It sounds complicated, but they're able to do all of this for you in one transaction (after you've deposited your initial position).

 

So, leveraged farming sounds pretty dangerous right? I'm gonna say yes and no. The key to me here was that they've explicitly stated that the value of your position is being measured by the underlying value of the ETH staked in etherfi's LRT protocol, not based on random wicks down due to rapid selling of eETH in the open market. I've had this position open for a couple weeks now, and I've only seen my LTV ratio increase on the very slow basis of my debt position increasing. In theory, the only way your position would get liquidated (other than letting your debt slowly accumulate past 95% LTV based on the APR you're paying) would be if etherfi's eETH were to be slashed by the ethereum network as a whole if they were found to be an untrustworthy validator. Seeing as they're one of the leading LRT protocols in the space (and already dropped a token without fudding the whole space), it seems unlikely to me.

 

That being said, this is crypto and totally unexpected misfortunes can happen. Do not risk more money than you're willing to lose on a leveraged position. If it's in there and it's leveraged, the risk of it getting zapped to just about NOTHING is NON-ZERO. Even beyond that, I'm not an expert on this stuff and would welcome any constructive criticism/feedback. DYOR, not financial advice.

 

As far as I can tell, Instadapp is going really under the radar. There are only about 3000 members in their discord. While they have been around since 2020 and have the 15th highest TVL of any DeFi app on DeFiLlama, their TVL has been pretty flat for a long time, and the Fluid vaults are a relatively new product of theirs. Despite there being about 135M USD worth of weETH in the vault at the time of this report, if I'm understanding the NFTs being distributed to represent vault positions correctly, there are under 1000 wallets currently farming this thing. I think it's the best way I've encountered to get exposure to the LRT/eigenlayer meta right now. I bought .85 ETH worth of pendle eETH YT's in late January and received an etherfi airdrop for season 1 that more than covered my cost, so naturally I held onto those.

 

The points I've been accumulating in this leveraged vault (for two weeks) have absolutely smoked the points I got from the pendle YT's since etherfi's season 2 started (nearly 2 months ago). Granted you can buy ~3x more YT's now with the same amount of money that I originally spent, but those are going to 0 by the end of etherfi season 2 (end of June). With the Fluid vault, you're only paying about 5% (assuming 30% APR, but current APR is 17%) of your original loan in the same time period.

 

Another thing to note is that if you have max stakerank with etherfi (takes about 30 days of holding >=0.1 eETH), your points accumulate even faster and you have more of an edge here.

 

Whew! Sorry for all the ranting and numbers, just tried to lay out the whole situation as I see it. I think as long as we're chopping in the market and I'm holding some ETH and willing to add some layers of risk to it, this (for me) is one of the best opportunities in the space. Please feel free to point out any issues/additional risks you see or ask any questions about the process!